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To-Be Process Review Workshop

Human Resources

Taxes

Location: ROSS Building

Room: 130

Time: 8:00 am - 12:00 pm

Date: 9/19/05

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Workshop Logistics

Tent Cards

Rest Rooms

Break

Parking Lot

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Workshop Agenda

1. Introduction

2. Tax Discussion

3. Capture Issues in the Parking Lot

4. Discuss Next Steps

5. Adjourn

Tax Reporting in SAP

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Taxes in SAP

Master Data Infotypes

International Tax Infotypes

Tax Wage Types

BSI Tax Factory

Tax Infotype Reports

Quarterly Tax Reports

Year End Tax Reports

How to Handle New States

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Master Data Infotypes

Infotype 0207 Residence Tax Area

Infotype 0208 Work Tax Area

Infotype 0209 Unemployment State

Infotype 0210 Withholding Info W4/W5

Infotype 0234 Add. Withh. Info.

Infotype 0235 Other Taxes

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Infotype 0207 Residence Tax Area

Stores the lowest tax authority level where the employee resides Eg. Employee resides in West Lafayette therefore tax

area set to Tippecanoe County Eg. Employee resides in Los Angeles, CA therefore tax

area set to California Eg. Employee resides in San Francisco, CA therefore

tax area set to San Francisco (special San Francisco tax)

All other higher level taxes will default (Federal and State)Employee will enter residence tax area in ESS, or it will default IN

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Infotype 0207 Residence Tax Area SAP

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Infotype 0208 Work Tax Area

Stores the lowest tax authority level where the employee works

All other higher level taxes will default (Federal and State)

Reciprocity agreements will look at residence and work state to determine taxability

Work tax area will default based off of Personnel Area in the Enterprise Structure

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Infotype 0208 Work Tax Area SAP

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Infotype 0209 Unemployment State

Stores the state the employee should have unemployment calculated for and the worksite where the employee works

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Infotype 0209 Unemployment State SAP

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Infotype 0210 Withholding Info W4/W5

Stores all information that would be filled in on the Federal W-4 or IN WH-4

Will also include W-5 information for Earned Income Credit

Will also include if employee should be exempt for Federal or State withholding taxes

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Infotype 0210 Withholding Info W4/W5 SAP (Federal)

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Infotype 0210 Withholding Info W4/W5 SAP (Indiana)

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Infotype 0234 Add. Withh. Info.

Stores information regarding override tax amount or percentage for Federal or State withholding taxes

Also will store different supplemental taxation method overrides

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Infotype 0234 Add. Withh. Info. SAP

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Infotype 0235 Other Taxes

Stores all taxes (other than withholding) and whether the employee is exempt from paying that tax

Includes both Federal and State taxes

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Infotype 0235 Other Taxes SAP

R Exempt but Reportable

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International Tax Infotypes

Infotype 0048 Visa Status

Infotype 0094 - Residence Status

Infotype 0556 Tax Treaty

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Infotype 0048 Visa Status

Stores information about the visa and the days the person is in the US

Determines the correct tax status for the employee

Information is stored for nonresident aliens on two subtypes US01 (Visa information) and US02 (I-94 records)

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Infotype 0048 Visa Status SAP

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Infotype 0094 - Residence Status

Stores the resident status of the employee

The field Residence Status is used to determine the tax residence status for an employee

Only employees with Alien as their Residence Status will have the substantial presence test check and visa status check carried out to determine if a reduced tax rate may apply

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Infotype 0094 - Residence Status SAP

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Infotype 0556 Tax Treaty

Two subtypes are maintained 8233 Compensatory earnings 1001 Non-compensatory earnings

The amount of exempt earnings will default based on the tax country and the visa status

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Infotype 0556 Tax Treaty SAP

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Tax Withholding Rates for Nonresident Aliens

0% - Tax Exempt

14% - Reduced Scholarship Rate Scholarships/Fellowships for F, J, M, and Q visa holders

25% - Standard Supplemental Rate

30% - Standard Scholarship Rate Scholarships/Fellowships for all other visa holders,

independent personal services, all other services

Standard Graduated Rates Compensation for employees

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Substantial Presence Test (SPT)

Used to determine the taxation status of an individual

Non-Resident alien rules for taxation only apply only if SPT does not determine an employee to be a resident

For those non-US citizens who meet the SPT, the residency starting date is the first day of the calendar year in which the individual met the test

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Tax Wage Types

/3xx Total Gross Taxable

/4xx Tax

/6xx Taxable Gross after pre-tax limits, prior to annual limits

/7xx Reportable Taxable Earnings

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Tax Types

01 Withholding

02 Earned Income Credit

03 Social Security Employee

04 Social Security Employer

05 Medicare Employee

06 Medicare Employer

10 - Unemployment

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Tax Wage Types

/301 Total Gross Taxable Withholding

/401 Withholding Tax/601 Taxable Gross

Withholding

/701 Reportable Taxable Withholding

/303 Total Gross Taxable Social Security

/403 Social Security Tax

/603 Taxable Gross Social Security

/703 Reportable Taxable Social Security

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BSI Tax Factory

All taxes withheld are calculated in BSI Tax Factory

Reportable earnings sent to BSI with appropriate residence and work tax areas

Reciprocity agreements all in BSI Tax Factory

Amount of tax to be withheld (/4xx) is calculated in BSI Tax Factory and is returned to SAP Payroll

Tax Update Bulletins provided by BSI for updating tax regulation changes

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Tax Infotype Reports

Exemption Expiration Report

W 4 Withholding Allowance Report

Tax Infotype Summary

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Exemption Expiration Report

Most jurisdictions do not allow employees' tax exemptions to be automatically renewed

Used to determine which employees' tax exemptions, entered in Infotype 0210 (W-4 Withholding Info), are due to expire soon

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Exemption Expiration Report SAP

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W 4 Withholding Allowance Report

This report checks employees' Infotype0210 W-4 Withholding Info records to find cases where employees have claimed more allowances than allowed by that tax authority

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W 4 Withholding Allowance Report SAP

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Tax Infotype Summary

Provides a summary of all tax infotypesand related data for each employee specified for a set period of time

Can drill-down to view individual infotype

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Tax Infotype Summary SAP

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Quarterly Tax Reports

Form 941

SUI Wage Reporting

Multiple Worksite Reporting

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Form 941

Reports taxable wages for withholding, social security, medicare Also reports taxes withheld, and deposits

Integrates with Accounts Payable to report deposits made to IRS

Report cannot be directly submitted to IRS Needs to be transcribed onto official 941

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SUI Wage Reporting

Reports unemployment wages and unemployment tax by individual for each quarter

SAP delivers both paper and electronic format

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Multiple Worksite Reporting

Reports unemployment wages and taxes for each worksite

Also provides number of employees working at each worksite for each month within the quarter

SAP delivers both paper and electronic format

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Year End Reporting

W-2s

W-2cs

1042-Ss

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W-2s

SAP delivers both all necessary paper forms and federal and state W-2 files

Only configuration required is to map University defined wage types to W-2 boxes SAP delivers all other functionality

Can reprint lost W-2s with Duplicate printed on them

W-2s printed on 2-up, 2-down perforated paper Front is blank and back of paper has pre-printed

instructions

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W-2cs

Only generated in manual check adjustments (off-cycles) done after original W-2 file is processed

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1042-Ss

Used to report all employee compensation payments that are exempt for taxation under a treaty

Used to report all non-compensation payments made to a nonresident alien regardless of whether tax is withheld or the payment is exempt

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How to Handle New States

Need to apply for EIN number from state

Need to determine if any other state tax types are required

Need to determine how pre-tax deductions should be handled for the state

Need to determine if necessary local (city, school district) taxes are required

Configuration will need to be set up in SAP

Need to test all configuration and calculations prior to tax being set up in production

Need to determine how W-2 reporting will be handled Paper, or electronic file